U.S. Expected to Own 70% of Restructured G.M.

Wednesday

The United Automobile Workers would hold up to 20 percent of General Motors through its retiree health care fund, and shareholders would be virtually wiped out.

DETROIT — In better times, many employees of General Motors called their company “Generous Motors” because of its rich benefits.

Now G.M. may stand for something else: Government Motors.

The latest plan for the troubled automaker, which is expected to file for bankruptcy by Monday, calls for the Treasury Department to receive about 70 percent of a restructured G.M.

Including the more than $20 billion that has already been spent to prop up G.M., the government will provide G.M. at least $50 billion to get the company through Chapter 11, people with direct knowledge of the situation said Tuesday. By some estimates in Detroit, tens of billions beyond that amount may be required.

The United Automobile Workers, meanwhile, will hold up to 20 percent through its retiree health care fund, and bondholders and other parties will get the remaining share. Shareholders would be virtually wiped out.

Although it has been clear for weeks that Treasury would have a majority stake of a reconstituted G.M., a 70 percent share — a figure that could still change — is higher than what had been expected.

The prospect of a G.M. effectively owned by the government raises a number of thorny questions. Countless policy decisions — on matters such as fuel economy standards, tax incentives to replace aging cars and green technology initiatives — will present conflicting interests.

For example, with $30 billion invested in G.M. and Chrysler thus far, would the government tip the scales in favor of those companies when buying vehicles for its fleets? Will Ford find itself at a disadvantage, since it has turned down federal money?

There are cultural challenges, too. Can the government help turn around a company known for its bureaucratic approach to business?

Aides to President Obama have consistently said they would be reluctant shareholders, and they plan no operating role in the company.

“No one is going to put U.S. government employees on the G.M. board,” one person close to the ongoing discussions said on Tuesday.

The day-to-day running of the firm, this person said, would be left to professional managers, and the government would not be involved in decisions about closing factories, renegotiating contracts or selecting product lines.

But that may not be so easy. Already, members of Congress have been calling Steven Rattner and Ron Bloom, who are running the auto task force, to complain about the closing of Chrysler and G.M. dealerships in their states.

As factories close or move, those calls most likely will grow more intense, in part because members of Congress will have a hard time explaining to constituents how the government could own 70 percent of the company and still have no control over deciding which factories stay open and which are closed.

Mr. Obama’s representatives may also feel compelled to weigh in on the design of new models to achieve his goals for greater fuel efficiency and lower emissions.

“Every decision down to what material is used in the bumpers will be seen, rightly or wrongly, as government-influenced,” said one person who was a consultant to Mr. Obama’s task force. But clearly the administration will have oversight to select or remove management as it already had in ousting Rick Wagoner as chief executive in March.

Back in December, Mr. Obama, as the president-elect, suggested that he wanted to avoid an uncontrolled bankruptcy. Now, only five months later, his White House is embracing it as a highly efficient solution, given the quick if painful bankruptcy of Chrysler.

“G.M. is a more complicated company,” said one person familiar with the government’s strategy discussions with G.M. “It is global, and much bigger. Every day we come upon a question with G.M. that didn’t exist in Chrysler, which is a pretty simple company.”

While G.M.’s aid does not approach the $180 billion that American International Group received from the government, the tab dwarfs the $18 billion that Mr. Wagoner estimated the company would need last year when he appeared before Congress.

The government plan calls for the creation of a new G.M., with its better assets like Cadillac and Chevrolet, that might emerge from bankruptcy by the end of the summer. The rest of G.M. would be sold or liquidated in a process that could take much longer.

As recently as last month, G.M. said in a regulatory filing that it expected the U.A.W.’s health care trust, called a Voluntary Employee Beneficiary Association, or VEBA, to receive 39 percent of the company, bondholders 9 percent, shareholders one percent, and the rest going to the Treasury.

The U.A.W. negotiated a bigger stake at Chrysler, with a retiree health care trust expected to own 55 percent of the company once it emerges from bankruptcy.

The union made clear to its members Tuesday that its leverage with G.M. was limited.

“Without government financial assistance, G.M. would surely fail, with devastating consequences including massive plant closures and a probable liquidation of the company,” the U.A.W. told its members. Bondholders, who hold $27 billion in G.M. debt, were unhappy with the plan because it gave them a much smaller stake than the U.A.W. trust, to which G.M. owes $20 billion.

Bondholders finish voting early Wednesday on a tender offer, widely expected to fail, that would exchange their holdings for shares. G.M. said it needed 90 percent to accept, or otherwise it would file for bankruptcy.

Despite their protests, some legal experts say that G.M. and the government are likely to prevail in bankruptcy court because the company would not be alive today without its loans.

“It is unfair treatment, and I think the bondholders are being discriminated against,” said Evan D. Flaschen, chairman of the financial restructuring group at the law firm Bracewell & Giuliani. “But the government has also put in more than $15 billion into G.M., so in a real sense it’s theirs to allocate.”

Meanwhile, union members are voting on a sweeping series of contract changes similar to those already approved at Ford and Chrysler. Under them, U.A.W.’s trust would receive 17.5 percent of G.M., and a warrant equal to another 2.5 percent of G.M. at a later time.

The union also is receiving an additional $9 billion in a note from G.M. and preferred stock in the new company, to go with its other shares, which it conceded the fund might not be able to sell for years.

Separately, a federal district court judge denied on Tuesday a motion in Chrysler’s bankruptcy case, filed by three Indiana state funds, that would have effectively derailed the company’s pending sale to Fiat.

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